Hey guys! Welcome here again, In this post, we will cover the law of agency chapter. This topic is also important from an exam point of view so read and understand carefully and practice for all chapter questions given on the site.

What Is An Agent

An agent is a person who works on behalf of someone in a business. For example, there is a person (ACCA student) who needs accommodation, but he can not find a place where he can stay, So if he wants to find a suitable place then he has to go to a state agency. A “State Agency” is working as a middleman, A person who works in a state agency has wide contacts with a different owner who wants to give their house on rent. This state agency is the best example of an agent.

An agent has the authority to make a legal relation on behalf of the principal or business holders. Some contracts can be done by an agent such as giving property on rent but some contracts are only handled by the principal or owner such as selling property.

What Is An Agency relationship?

An agency relationship can be established in different ways such as:

Express Agreement

The written or oral agreement between the principal and agent.

Implied Agreement

There is no agreement (Written nor Oral) between the principal and agent but still, they sit together and work together. Basically, they work together but they do have not any contract or agreement between them.

By Necessity

This depends on the situation or needs such as:

  • Give responsibilities
  • When and where an act is necessary because of emergency
  • Not possible to make connections or can not communicate
  • Agent act is in the interest of the principal

By Ratification

If an agent does anything for whom he has no authorization but after knowing the condition principal allows him to do that action. For example, an agent gives a loan of to a person $5000 when he has just authority of giving $4000 only when the principal hears about this event he allowed the agent to do so.

By Estoppel

In this case, there is no relation between the principal and a person but still principal accepts that the person was/is my agent.

What Is Authority In The Law Of Agency

It is a central issue for an agent in the concept of the law of agency. Authority determines:

  • Power on behalf of the principal
  • The principal is liable for which act

Note: If an agent uses authority beyond his limit or exceeds his power, the Principal is still liable to the third party because the agent is working for the principal but the principal can take action on behalf of breaching the contract.

Main Types Of Authorities In The Law Of Agency

Express Authority: The authority which is given by the principal to an agent in written form.

Implied Authority: Principal gives authority to do if the act is reasonable, if an agent has the legal authority to do the act, or if an action is not prohibited by the principal.

Apparent or Ostensible Authority: This means if an agent has already a deal and the principal ratified that act in the past so he can do that act in the future as well.

What Is Breach of Warranty In Authority

If an agent exceeds his limit of authority and the principal ratifies his act then the principal is liable and if the principal does not ratify then the agent is liable for “Breaching of Warranty of Authority“.

What Is Liability in Agency law

In this case, the agent discloses that he is working on behalf of the principal, so directly the activity or contract will take place between the principal and third party, so the agent is not liable for anything in this case but the principal is.

The agent will be liable if:

  • He shows an intention to take personal liability by contracting or signing the document
  • The agent did not disclose principal
  • When an agent is acting on behalf of a principal where there is no principal.

What Are An Agent’s Duties

There is a fiduciary relationship between the agent and principal like a trustee, Agent should do:

  1. Not to do or create conflict for his personal interest
  2. He should act in the principal interest
  3. He should avoid making a secret profit
  4. Principal money should be accounted for by him

Remedies If An Agent Breaches The Contract

  • The principal can cancel the contract from a third party where the contract is made by the agent
  • An agent can be fired without any notice
  • The principal will not be liable to pay money but can recover money from to agent who already paid for the contract

Agent Right toward principal

  • An agent can claim for the services which he has already done completely and with honesty
  • He can claim for those expenses which occur during the job which he is doing for principal
  • He can keep the principal’s property until his expenses are paid by the principal

We try our best to explain everything which is necessary to pass the corporate and business law exam. law of agency is usually examined in the exam, so read and understand this chapter carefully and practice for its questions.